28th
SAP’s Dilemma
Recently co-CEO of SAP Leo Apotheker talked about the company’s decision to slow the rollout of BusinessByDesign (BBD), their ERP as-a-service product.
He gave valid reasons:
- Changing the business model from traditional license sale to subscription sale will result in revenue drop in the short-term.
- Running a SaaS business requires capex investment upfront, increasing costs and supressing margins, again in the short-term.
He is essentially saying - I paraphrase - “The revenue and margin we get from selling traditional license plus professional services is better, so we’d rather not sell BBD to customers unless we really, really have to (such as when we would otherwise lose an important enough prospect).”
Now let’s keep things in perspective: NetSuite’s comparable product costs 50% off what customers would pay just for SAP maintenance. SaaS is just cheaper and faster to deploy - and in this economic climate, that means a lot.
It is tough for SAP as a public company to focus on the long-term, but as a consequence it may find itself losing ground that’s difficult to reclaim. I mean, how often do customers replace their ERP systems? Especially knowing how challenging it can be to deploy the on-premise product - remember all those ERP project horror stories?
Time will tell if this was a good decision.
